Tuesday, October 30, 2012

The
real truth about Barclays' organised criminal activities, just in the
manipulation of LIBOR alone, is now finally starting to become clear, and this
raises a vast number of ramifications for all the other criminal banking enterprises
involved in the LIBOR rigging scandal.

It
is to be hoped that a large number of Barclays' financial manipulators, soon to
be named publicly in the High Court action, are beginning to feel the ground
becoming very unstable under their feet. If I were involved in any of these
cases, I would already be briefing my lawyers that I wanted a deal from the
SFO, secure in the knowledge that the price of such an opportunity was a full
and frank disclosure of the names of my senior management inside Barclays, and
the part they played in the serial abuse of LIBOR.

A
major civil action is being brought against Barclays by Guardian Care Homes, whose lawsuit is seen as a major test case for LIBOR-rigging claims. The decision of the Court
to allow the case to go forward
to trial, now potentially opens the door to
billions of pounds of further
legal actions against Barclays and other
crooked banks involved in
the rate-setting scandal.

The Guardian Care Homes’ claims against
Barclays over mis-sold swaps, designed to protect the company against rises in
interest rates, amount to about £38m. Barclays faced a preliminary hearing,
ahead of a trial, over allegations it mis-sold to a care home group complex
interest rate derivatives that were in turn based on false Libor rates.
It is alleged that the creation of the false rates through Libor-rigging at
Barclays inflated the cost of the swaps to the company. The care home group has
already settled a similar swaps claim against Lloyds Banking Group for an
undisclosed sum.

Barclays,
with their usual brand of arrogance combined with bully-boy tactics responded
by saying; '... This business had a suite
of advisors and a lot of financial experience and skill in-house. We understand
that (the plaintiffs) entered into their swaps with sufficient understanding to
exercise their own judgment as to whether the products would meet its business
objectives. They are a significant business, which owes Barclays £70m. We do
not believe the case has merit and will defend it.”

Such
phrases are very common from large financial institutions, particularly when
they are looking down the barrel of the gun, so expect nothing else.

But
the runes don't look very good for Barclays right now.

The bank was given a torrid time at the High Court in London
on Monday by Lord Justice Flaux, who claimed that Barclays was '...intentionally
trying to hide the true scale of the Libor scandal...'

This is an amazing statement from an experienced Judge at the
start of a trial and reflects the parlous state of the defence raised by
Barclays and their lawyers, which clearly got under the skin of a very
experienced High Court Judge.

The
Judge accused the bank of “misleading” customers. Allowing the case to continue
to trial, the judge described the bank’s attempts to dismiss the Libor aspects
of the care home operator’s claim as “shadow boxing” and said they were “doomed
to fail”.

I
really don't know when I have ever heard such a robust dismissal of a
defendant's defence at a pre-trial hearing. The Judge was effectively calling Barclays
a bunch of fraudsters and liars, as the description of the act of 'misleading'
customers is an allegation that the bank had behaved fraudulently.

But
the Judge did not stop there, and over the course of a day-long hearing, he
repeatedly rejected Barclays’ objections and said that notwithstanding the
pre-trial disclosures already made by Barclays, that the bank would be forced
from next month to start to disclose further potentially embarrassing details,
such as the identities of staff implicated in Libor manipulation. With exquisite
frankness and an absence of disingenuousness, he said;

“...[It] just seems
perfectly obvious... that the people responsible for giving those instructions
[to manipulate Libor] must have known customers were being misled,” he said.

The
QC, representing Guardian Care Homes, which has more than 30 care homes around
the country, told the hearing that the disclosures received so far from the
bank were “likely to be the tip of the iceberg” and that the case would go to
“the heart of the management of Barclays”. He continued with an observation
that many people have come to learn about Barclays, to their very great cost. “...Barclays
seeks to serve up its own version of the facts, a sanitised version..,” he said.

Barclays
could now be forced to release hundreds of thousands of
emails connected to attempts to rig
Libor, demonstrating that the bank knowingly sold interest rate derivatives
while manipulating the world’s key borrowing rate. What would make it even more piquant is that that
disclosure could lead to a whole series of as yet unidentified
senior bankers connected to the scandal being named in court when the case
comes to trial next year.

Now that would really bring on the painsbecause they could then all be
arrested by the SFO, once the details of their involvement had been outlined in
Court. This would solve so much time and trouble, and they could then be
invited to consider their position as to whether they wanted to play hard-ball,
or roll over and engineer a plea deal! I mean, selling interest rate derivatives
at the same time as you are busily manipulating the very underlying interest
rate structure, a clear case of 'heads I win, tails you lose' brings a whole
new meaning to the phrase 'conspiracy to defraud', and takes the whole scam
into a new dimension of criminality!

There
are so many ordinary people who have been screwed over by the Barclays
Organised Crime family, and I am certain that this news of their arch enemy being
slapped down by the Judge will have gladdened their hearts. It is to be hoped
that the new revelations will reach right up into the top floor suites and name
the guilty men!

The
British Government has repeatedly failed to pin the banking bastards down
because they have relied too much, and believed too many of the lies ritually
trotted out by the suits; while the British people have been so poorly
protected by the pathetic regulatory regime that has been allowed to masquerade
as a meaningful interface between the banks and the public.

And
pathetic they have truly been. The PPI fraud scandals which all took place on
their watch have still not been settled, and despite the fact that the figures
for monies being set aside to recompense losers are now admitted to be over £10
billion owed by UK banks, it is obvious no lessons have been learned.

It
is now reported this week that after a
reversal by the Financial Ombudsman Service of two decisions not to award
compensation to victims, banks could now face thousands more additional claims
from small businesses over more fraudulent behaviour, through the mis-selling
of the interest rate swaps. Banks,
including all of Britain’s major high street lenders could now be hit with a
flurry of further claims that could potentially cost them millions of pounds
after the surprise FOS judgements. In findings published this week, two unnamed
banks were ordered to pay hundreds of thousands of pounds in compensation to
two customers mis-sold interest rate swaps.

In one
case alone, the new FOS verdict recommends the lender pay compensation that
could cost it more than £500,000. Eleven banks, including the usual suspects,
Barclays, HSBC, Lloyds Banking Group and Royal Bank of Scotland, have signed up
to a Financial Services Authority redress scheme for swap mis-selling.

Giving evidence to the
Treasury Select Committee this week, Sir Donald Cruickshank, who has carried
out several reviews into the banking industry for previous governments, said
the recent Libor-rigging scandal represented only the “tip of the iceberg” of
the problems facing lenders.

Guto Bebb, a Conservative MP
said the FOS judgement showed the new scandal could be “bigger than PPI ”,
which has already cost the industry more than £10bn.

“The finding that banks are
responsible for the advice they give is very significant and represents a
complete change from the 'buyer beware’ approach previously taken,” said Mr
Bebb.

Barclays has made the
largest provision against swap mis-selling claims, putting aside £450m to pay
compensation, while HSBC and RBS have each made smaller provisions. Lloyds has
said it does not expect the costs of the scandal to be “material”.

The
FSA currently estimates more than 40,000 swaps have been sold. Hector Sants, the former
chief executive of the FSA, said he wished “bankers had been more honest” as he
complained that many senior industry executives had been “self-delusional”
about the risks their firms were taking.

More
money set aside to compensate swaps fraud will mean reduced profits, and
therefore reduced tax revenues for UK plc, as I reported only last week! But
yet no-one in the Regulatory Establishment has been called to task for this
wholesale failure to protect British public interests against this tidal wave
of organised crime. No one has been challenged and asked 'what the hell were
you doing while all this criminality was taking place'. No-one's resignation
has been urged, at least not publicly, and no-one inside the regulatory agency
has apparently been disciplined. When it comes to dealing with the 'too big to
fail, too big to jail banks', it is clearly no point hoping that the FSA will
do anything!

So
we must rely on the good sense and the sharp intellect of a High Court Judge
who has the power to make demands that Barclays cannot just ignore, in the same
way as they have repeatedly ignored the laws designed to bring controls to
fraud, sanctions breaking and money laundering. The Judge remains our last defender
of decency, truth and morals and we must all hope that he will be the man to
drive the sharpened stake through the dark heart of the great vampire bank that
has sucked the life-blood out of so many!

Sunday, October 28, 2012

Regular readers of this blog will know that I have long
been very critical of the failure of the FSA to police the financial markets
effectively!

I have never tried to disguise my contempt for the way in
which the lead regulator has consistently failed to use their prosecutorial
powers to bring actions against financial criminals.

I am unrepentant in my
firmly-held beliefs that only strategically-targeted prosecutions brought
against some of the most egregious organised crooks and Mafiosi who work in the
City will work to stop them.

It would have a salutary impact upon the
widespread incidence of criminal conduct which has been exposed in the recent
examples of organised theft, fraud and money laundering, and perpetrated by
some of the biggest names in the banking sector!

Criminalising the bastards is the only way to take them
down, and exclude them from the financial sector. It is a solution whose time
came of age a long time ago, and I don't know what is stopping it being used
aggressively, remorselessly and with maximum prejudice. I think it is a class issue
and too many people in the regulatory sector come from the same social background,
and they are frightened to exercise their powers too effectively for fear of
being excluded from the gilded job opportunities that await former regulators
in the banks and the Big 4 consultancies if they don't rock the boat too much!

I have long wondered at the reasons behind this wholesale
lack of moral courage and ambition to go after the biggest criminals and to
bring them down. When I was at the Fraud Squad, our primary aim was to go for
the most high-profiled crooks we could set our sights on! The FSA was tasked
with the job of taking down financial criminals from its earliest days, and it
has had the powers to prevent financial crime and to prosecute market
manipulators, insider dealers and money launderers since 2001.

For many years since its inception, the FSA has routinely
ignored the responsibility given to it by Parliament. In 1998 I was
commissioned to write a review for H.M.Treasury, examining the state of money laundering
controls in the London markets. In the course of so doing I was able to
interview a number of senior officials from the putative FSA about the way in
which they would use their new powers to deal with financial crime. One
official said to me;

“…There is an anxiety about the new criminal functions which we are
being tasked to accept…various elements such as insider dealing, market
manipulation, etc, all tend to colour our internal philosophy towards the
question of conducting prosecutions…you really should understand, because of
the difficulties associated with obtaining convictions in the criminal courts,
there is no unswerving acceptance of the need for wholesale prosecution
powers…”

In other words, there was not going to be any serious policy of
bringing prosecutions if the FSA could help it!

I have wondered in the past whether the FSA was really serious about
financial crime, because they did not seem to invest any serious time or effort
into formulating any meaningful response to its existence.

I was once approached at a public conference by a young German woman
who asked me if she could have a copy of my paper which I had just presented. I asked her why she wanted it and she told me
that she had been seconded to the FSA from Goldman Sachs for a year's sabbatical.
The FSA had entrusted her with formulating their Financial Crime policy, but knowing
nothing about financial crime, she was going to every conference she could find
and blagging copies of papers she had listened to which she thought might be
useful to her.

I rang her manager and suggested that the FSA hire me for a couple of
weeks to come in and teach this young woman what she needed to know about
financial crime so that she could make a genuinely valid contribution to the
debate. His answer was interesting. He said;

'...Why on earth would be bother to consult you? If we need any
low-level consulting of this kind we can get it all for free from one of the
Big 4 consulting firms. They do it for nothing for us because they like to be
privy to our thinking...'

That put me firmly in my place!

I have written many times that proper criminal prosecutions are the
only way to ensure that the financial sector will ever toe the line. Anything
else is just window dressing. Why should financial practitioners who steal
their client's money or defraud them by mis-selling, or who manipulate the
LIBOR market to the financial detriment of others, be allowed to walk away from
the consequences of their actions without any meaningful penalty?

I have presented strong written evidence demonstrating that criminal
prosecution contains the greatest exclusionary impact for wrong-doers and means
that they can never come back to their former stamping grounds, because their
former business partners will not do business with them. So why does the FSA
continue to focus on fines and regulatory penalties for serial offenders, which
they know the business sector does not fear or respect?

One answer which has occurred to me is that perhaps the people who are
employed to enforce the financial crime criminal agenda inside the FSA are
simply not competent enough, or perhaps lack specific criminal investigatory
experience, to enable them to know how to go about dealing with these
criminals. Perhaps they feel inhibited by their lack of knowledge and skills to
be able to take on and face down these scumbags.

Make no mistake, going up against a professional financial criminal,
particularly if he has a solicitor present, requires good knowledge, sharp
skills and a lot of moral courage. You have to first know how to handle the
situation where the bad guy is going to attempt to needle you and get under
your skin, suggesting that you are a financial incompetent who doesn't
understand the arcane rules of his market. You have to know how to give as good
as you get and take the initiative so he never gets the upper hand!

He is going to try and make you feel small, so that even you begin to
doubt yourself, and you must know how to get under his skin and past his guard
if you are going to be effective.

You have to know how to deal with a suspect when he has to be cautioned
and how to conduct an interview that will be admissible later on in Court and
won't get thrown out because you missed one of the many myriad rules of conduct
for the treatment of suspected persons.

All these skills come with time, repeated experiences and many court
appearances. You don't just acquire them by osmosis, copying other's copies of
power-point, or watching old repeat episodes of Inspector Morse.

A properly trained detective, who is one of the very few people fully
equipped to deal with criminals, spends his or her entire career studying the composition
and psychology of the criminogenic personality, and all will admit that it is a
never-ending learning curve!

Just because someone is a solicitor does not mean that they are going
to have the skills necessary for these requirements. Of the solicitors in the
regulatory milieu, the vast percentage of them undertook their training in City
commercial firms, where they specialised in civil law. Criminal law is still
looked down upon in many law firms inside the Square Mile, although some have
begun to develop more wide-ranging regulatory/criminal practices as more and
more of their natural client base find themselves potentially falling foul of
the criminal law.

I worked in a major City law firm for ten years advising and dealing
with financial criminality, and most of the solicitors I met and worked with
had forgotten any of the criminal law they had ever studied in their first year
at university. Few of them had any knowledge at all of the many criminal
offences which make up the range of offences most often committed by the fat
cat community!

So, with this thought in mind, I decided to look at the FSA financial
crime team and see what qualifications they could muster between them to
demonstrate their ability to deal with full-on criminals! I thought that they
must at least have someone who may just have worked in the police or at SOCA or
perhaps NCIS in the old days!

There is nothing secret about the names involved, they can be found on
the FSA office chart which is freely available on the Web! I have used the
edition dated September 2012 so I assume it is reasonably accurate.

Tracey McDermott has a recently been confirmed as the new Director of
the Enforcement and Financial Crime Division. Ms McDermott is a former
solicitor in a City practice and has been with the FSA since 2001. She was
acting Head for a year after Margaret Cole, another lawyer, resigned, and she
has had some successes in securing convictions for insider dealing, while other
cases are pending. She will also claim
success for fining three small banks for failures in their Money Laundering
administrative provisions, cases arising out of the FSA report of June 2011

However, her willingness to think outside the box in criminal matters
and her faulty interpretation in this area of expertise was tested quite
strongly when she gave evidence in front of the House of Commons Treasury Select
Committee on 16th July 2012, investigating the LIBOR scandals.

She was pinned on the ropes by David Ruffley, Conservative M.P for Bury
St Edmunds, who pressed her on
why the FSA did not act as a prosecutor in the LIBOR case against Barclays. Ms McDermott
replied that it was not the FSA’s area of expertise to bring such cases and
that a discussion usually takes place with the relevant authorities who might
bring a prosecution.

As an answer it revealed a lack of rigour, and
indeed was not wholly factually correct. David Ruffley revealed that in contrast to the FSA stance that it
did not have the powers to pursue criminal investigations into such wrongdoing,
some of the committee members had received senior counsel advice that that was
not the case and that the FSA could indeed have pursued criminal probes under legislation
including the 1968 Theft Act or the 2006 Fraud Act.

Ms McDermott replied that the regulator did
not have a general power to prosecute or investigate criminal wrongdoing but
that it could conceivably have prosecuted as a “private prosecutor”. This
narrow interpretation of the FSA role was later criticised by the Select
Committee who indicated that the FSA had an overriding responsibility to
prevent crime in the financial sector, and that taking action against Barclays
for this crime fell within that category.

Another public document which deserves greater scrutiny however is
the FSA Financial Crime Newsletter dated October 2012, Issue 16.

In this document Ms McDermott gives a fairly laudatory report on
the workings of her Division, for which, no doubt she may be forgiven, after
all, if she doesn't, who will? What is interesting
however is the announcement that a gentleman called Bob Ferguson is taking
extended leave from his role of Head of Department for Financial Crime and
Intelligence, and who his replacement will be.

Mr Ferguson it transpires is an academic layer who holds a
visiting professorship at Queen Mary College, University of London. He has been
in regulation since joining the Securities and Investments Board in 1987, and
has been a career regulator ever since. While he has a fine pedigree as a
theoretical lawyer specialising in regulatory law, I can see no evidence from
my researches that he has ever undertaken any criminal investigations or dealt
with any financial criminals in his career. He has helped to formulate the
FSA's handbook of Rules and Guidance and led on the development of the FSA
Principles. For the last five years he has been involved in the build up of the
FSA's financial crime and intelligence work, and we all know just how forceful
has been the FSA response to financial crime in that time. I mean no disrespect
to Mr Ferguson personally, no doubt his work has made a meaningful and significant
contribution to deterring financial crime in the UK!

So, who is replacing him?

Step forward Sharon Campbell.

Now, I know very little about Ms Campbell and I can find very
little out about her. For all I know, she may be highly skilled and trained in
financial crime investigation and interdiction. She may have studied financial
crime methodology as part of a criminology course at University. She may have
served with distinction in a police force, MI5, H.M.R.C, or H.M Treasury,
investigating serious financial crime and money laundering. She may have been
part of the FATF specialising in AML interdiction best practice, and she may have
huge competence in criminal psychology. She may have travelled abroad to assist
foreign governments implement AML laws and regulations, she may have taught and
mentored foreign police agencies and financial intelligence units.

She may have all or any of these skills, but if she has, we are
not told. So we have to make do with such information as can be dredged up from
publicly-available sources.

In her LinkedIn entry, Ms Campbell advises us that she attended
Geoffrey Chaucer (school?) from 1981-1988.

From 2011 to September 2012 she was Head of the Department for
Authorisations.

Her previous role was as Head of Department
for the Central Analysis & Reporting Department.

Prior to this, She was Manager of the Retail
Intermediaries & Mortgage Sector team, mortgage intermediary supervisors
and for leading a team with responsibility for a programme of large, cross-FSAinitiatives.

Before joining the FSA, she had various roles with
companies in the financial services industry, including sales and sales
management, compliance and programme management roles for various companies,
including HBOS and Zurich Financial Services.

In September 2012 she was appointed as Head of Financial Crime and
Intelligence?

One of the issues which repeatedly raises itself during debate
about those who work within the FSA (soon to be FCA), is the apparent degree of
ease with which they are allowed to switch between roles, moving from one job
to another.

A recent series of comments on the Money Market website
demonstrate what ordinary members of the public feel about this game of musical
chairs that goes on all the time in the FSA. When talking about another job change
in the Department of Retail Enforcement, the following comments were posted.

'...No mention of salary or performance bonus structure. I have
every faith in the remuneration committee to see him alright. It's not real
money in Quangoland...'

'...Would have been nice to see the appointment go to someone
outside the FSA rather than from the
same family. I think someone needs to open the windows at Canary Wharf to let
in some fresh air, it must be quite thick by now with the smell of all those
snouts in the trough...'

'...Have just sent an FOI request to the FSA as to whether the
post was advertised externally, if there were any external candidates
shortlisted. Basically it was a shoe-in for the trough merchants in-house...'

'...I think this is disgusting and just goes to show that
re-arranging the letters above the door will not make any difference come
January 13th. Same old people making the same old mistakes, brings a whole new
meaning to desk share, must be fun being able to find a new desk when the music
stops. " Oh look, I'm head of retail enforcement"...'

Of course, it may well be that these people are the best there is
for the role on offer, and that no amount of diligent searching and public
advertisement will identify someone who might just have similar, or dare we say
it, 'better' skills and experience! Or perhaps it is as I said earlier, they
just don't care very much about financial crime and can't be bothered to look!

Wednesday, October 24, 2012

I am so angry, I am finding it hard to restrain my
otherwise genteel prose and not adopt some basic Anglo Saxon language instead.

I opened the newspaper this morning to be confronted with
the strap-line '...Plea Bargains for UK...' The story opened;

'... The Government is to give the green light to the
introduction of plea bargains in the prosecution of complex financial crime.

The Ministry of Justice is set to publish its response to
consultation on “deferred prosecution agreements” the legal mechanism companies
will be able to use to avoid prosecution for financial crimes such as bribery.

Legislation could follow as soon as early next year. Barry Vitou,
partner at law-firm Pinsent Masons said: “There have been rumours for sometime
that the Government is looking to accelerate the introductions of DPAs. It fits
with the Government’s crime agenda it is now pursuing.”

It is assumed any new law will mimic the US model. The law allows
companies to agree a deal with prosecutors, including paying a fine and setting
remedial action, in return for avoiding prosecution...'

If this discredited Government ever wanted to be able to dispel
the damaging impression that they were too close to the organised criminals and
the gangsters who run the City of London; that they were still captured,
financially and politically by the disgusting vested interests who squeeze the
billions of pounds out of the sleazy funds that daily flow through the
financial sewers of the London markets; that they protect the interests of
those who benefit from the vile profits from money laundering, Bribery and
Corruption on a global scale, foreign tax evasion, or home-bred tax avoidance
for corporate entities who thumb their nose at British Corporation Taxes; or
those who process the uncountable billions of dollars, pounds and euros that
are generated by the global drug barons and which have made the City of London
economically drug dependent, they should not have announced this specific piece
of criminal justice policy right now.

Let us dispel one lie right away. What is proposed is not 'plea
bargaining' by any stretch of the criminal imagination. If you want to give it
a name, then call it by what it truly is and that is a craven capitulation to
the vested interests of the financial sector, who have just been given another
'get out of jail free' card by this most feeble of Governments.

This proposal is 'Prosecution Avoidance', even the press release
says so. It is a means of not being prosecuted for major crimes, how on earth
can this be called 'plea bargaining'?

Plea bargaining takes place when criminal charges have been
brought, the defendant charged by a prosecutor, and the defendant is now at a
stage of the process when he is confronted with the full understanding of the
gravity of the indictment against him, for which he will be tried.

He is then invited to indicate which charges he will be willing to
plead guilty to immediately, having received an indication from the prosecution
of the amount of jail time they are going to invite the judge to accept as a
fair and just outcome of the plea agreement. The defendant knows he is going to
jail as a convicted criminal, he is now merely negotiating the amount of time
he has to serve!

Plea bargaining is something I have been advocating for some time,
having seen how effectively it could be used in the US courts, particularly
against white collar criminals. I studied plea bargaining in the US courts
while travelling on a Winston Churchill Travelling Fellowship, and the topic of
my study with which I was expected to comply was '...Methods and systems
designed to make Fraud trials more effective in the UK...'

I studied plea bargaining in the Federal Courts in Washington, and
in two separate State courts in Pennsylvania and in New York. I sat with the
judges on the Bench and was given a completely free rein to interview Judges,
prosecutors, both federal and district attorneys, defence attorneys, police
officers, and Court administrators, and I observed the plea bargaining process
first hand in a large number of trials.

Upon my return to England I completed a full report of my findings which were circulated around Whitehall, the SFO, the Treasury, the AG's Office, the Bar Council, and the Law Society. Upon submission, my report disappeared into a legal black hole and I never heard anything about it again! Nevertheless, it was there to be used if so desired and it had the full approval of the Manhattan D.A.s office as an accurate exemplar of plea bargaining.

So, I am not going to accept the casual use of the suggestion that
what is proposed here is a rigorous 'plea bargaining' process, because it is
not. The use of this process-specific phrase is a typical piece of British
chicanery, emanating from some weasel-mouthed civil servants in the Department
of Justice, who have taken it upon themselves to use this honourable phrase to
give the impression that the British are about to take white collar crime
seriously.

Mark my words, as this debate continues we will hear a lot more of
this big lie being spread about, that this is an effective and just way of
dealing with white collar crime cases. We will be faced with more lies when we
are told that this policy demonstrates that the Government is illustrating its
toughness in going after the major white collar criminals, and dealing with
them in a draconian manner. They will spin the effect of this law, they will
dissemble, they will lie, they will float a package of untruths and distortions
about this policy, and they will say how they are now getting really tough and
prosecuting more white collar criminals.

Well don't believe a word of it, because it is all total bollocks!

The Government is talking about introducing what are called
'Deferred Prosecution Agreements' (DPA). These are yet another soft-option,
hire purchase equivalent for the fat cats!

Today,
Justice Minister Damian Green started the bullshit smothering process when he said
that the new arrangements would give prosecutors an "effective new
tool" to tackle economic crime.

"Fraud
alone is estimated to cost the UK £73 billion each year, yet far too few
serious cases are brought to justice," he said. "It is clear we must find new
and better ways of ensuring organisations who commit criminal wrongdoing do not
get away with it. DPAs... will ensure that more unacceptable corporate
behaviour is dealt with including through substantial penalties, proper
reparation to victims and measures to prevent future wrongdoing."

The
new DPAs will allow organisations to voluntarily admit to wrongdoing and
resolve to make things right. Where a prosecutor, such as the Crown Prosecution
Service (CPS) or Serious Fraud Office (SFO) agrees that a DPA is an appropriate
course of action, it will be able to defer prosecution in exchange for a range
of stringent conditions.

The
agreement will be made in open court and details of the wrongdoing and
sanctions published. If the prosecutor is satisfied that the organisation has
fulfilled its obligations by the end of the deferral period there will be no
prosecution, but if the conditions are not met then the organisation could
still be prosecuted.

This
is just the biggest load of unadulterated crap! The perpetrator has nothing to
lose, and everything to gain. The bank isn't going to be prosecuted, they have successfully avoided such an outcome, so what else
could they possibly want?

The
perpetrator, (well, in reality his slippery lawyers, all of whom will profit
mightily from these proposals, a feature which will make their adoption by the
snooty 'Magic Circle' of City Solicitors far more easy to effect, because the
whole process will not mean ultimate criminalisation, so they won't have to get
their lily-white hands grubby dealing with criminals) will effectively be
allowed to determine the outcome of the proceedings, in consultation with the
prosecutors.

A
DPA is a wonderful Christmas present for a lazy prosecutor, because he will not
even have to worry about going into court to run a contested case, so it will
suit the criminal law illiterates inside the regulatory agencies, who will
benefit again because they can now start showing the number of DPAs as part of
their commitment to firmer regulation.

This
process is so transparently corrupt and dishonest it makes me sick with anger!

DPAs
will now become the de facto benchmark for dealing with City financial crime.
The banks and the financiers are going to have a field day. They are willing to
pay fines quite happily; they pay compensation quite happily; they will pay
costs quite happily, because it doesn't come out of their pockets, so it doesn't hurt
them one iota. The financial penalties only hit their shareholders, so it does
not matter, and who cares anyway!

They
will agree to any proposals a prosecutor asks for, because it will only mean
throwing other people's money at the remedial requirements. They will sit back,
nod their heads, commit to everything they are asked, and then get on with the
business of engineering more financial crimes.

Oh,
and don't think for one minute that the likelihood of their being prosecuted at
some stage in the future if they don't behave, holds any basis of reality, cos'
it just ain't going to happen! The passage of time, helps witnesses go missing,
forget their evidence, lose exhibits, and generally make the reality of a
lawyer-backed application for a dismissal of all charges so much more likely.

This
truly is one of the most spineless and craven actions by this increasingly
discredited Government. To announce this total cop-out of all levels of
responsibility for the prosecution of financial crime in the City, at exactly
the same time as the Prime Minister is talking big about the need to get
tougher with ordinary criminals, is nothing more than the purest hypocrisy.

It's
all about being hard on working class criminals because that gets votes, while
letting the City off scot-free. Every time the FCA comes up against a piece of
organised crime in the financial sector, the perpetrator's lawyers will be
straight on the phone talking sweetly about a DPA, because otherwise, '...our
clients will reserve their rights and will fight you tooth and nail, and it
will take you years and huge costs just to come up with some charges with which
you will then have to go to court and roll the dice...'

Take
it from me, the FCA will roll over every time, and offer a DPA. The banks will
accept it because it means that no-one ends up with a criminal conviction,
(which as we now know, is the only thing they fear), and everyone lives to
defraud another day!

What
makes it worse is that the regulator and the government will spin this
dishonest process as being a meaningful effort to combat City crime, while all
the time, the frauds, the rip-offs, the money laundering, the insider dealing,
the bribing, the corrupt practices, the facilitation of the needs of the dodgy
foreign dictators and their blood money will continue.

This
such an awful betrayal of ordinary working people who have been repeatedly
fucked over by the criminal British banking system, that I am lost for the
words to describe how I truly feel. It is symptomatic of this Government and
the way they have completely lost touch with the ordinary meaning of words and
the truth of the banking scandals which continue to engulf this country.

There
is only one way to combat City crime, and that is to prosecute the wrong-doers
as hard and as often as possible, so the message gets through to every Mafiosi
in the Square Mile. We need ambitious criminal prosecutors and tough specialist
fraud investigators who have proper criminal
knowledge and understand the way the criminal mind works, and who are not
scared, yes, let's use that word, who are not scared to take on the City
establishments and their slippery servants with their weasel words, their
mobile moralities and flexible integrity!

We
did it in the 1970s and early 1980s, when I was at the Fraud Squad, and before
the City fathers got scared of our nasty policing tactics and our honestly-held
ambitions to lock up the City fat cats, and lobbied the Government and their Machiavellian
civil servants, to clip our wings. I am proud that I was part of that era, and
I feel sorry for my colleagues who are prevented from doing this good work
today.

The
Government can try and bull-shit us as much as they like. They can lie, and
dissemble, and spin the truth as hard as they like about being tough on financial
crime, but this piece of craven caving in to vested City interests isn't going
to do it!

Monday, October 22, 2012

A
number of readers of my recent blogs have commented upon my observations about
the way in which the financial sector is regulated, and have asked why, if the
organised criminality of the City is so blatant and so obvious, should more of
the most egregious criminals not be prosecuted with more dynamism and
effectiveness?

Viewers
who watched my interview on the critical Max Keiser Report will recall Max
Keiser's genuine annoyance at the way in which the criminals in the City appear
to get away with the most serious offences, because the police are prohibited
from going after them.

Max
referred to them as 'financial terrorists', and challenged me to share his
views. While I can sense the outrage in his arguments, I am a lawyer by
training, a fraud detective by inclination still, and a financial criminologist
through academic discipline, and I know
that phrases such as 'terrorist' and 'terrorism' have academic and juridical
definitions which we mistake and mis-use at our peril.

For
these reasons, I could not share his use of the phrase, but I am still happy to
adopt the use of the phrases 'organised crime' and 'organised criminals' to
define the people who engage in this institutionalised level of gross
criminality within the financial sector! They behave in the same way as any
mafia or organised crime enterprise, they obey the same codes of 'Omerta' and
they have strictly hierarchical structures which tend to insulate the upper
reaches of the organisation, and remove them from the more blatant exercises of
criminality, allowing them deniability, while permitting them to profit from
those excesses. For all these good reasons, I have no qualm in calling them
what they are, taken together they are organised criminals; their institutions
are mafias, and their top executives behave like gangland bosses.

Watching
'Roberto Diamante', Godfather of Barclays, giving his nauseating evidence to
the Select Committee, while backed up by his consigliore's, getting all chummy
and personal with the Committee Members, calling by their first names, and
telling them how much he loved his banking 'family', reminded me of nothing so
much as a scene which could have come direct from the 'Godfather'!

William
Chambliss, an American criminologist put it this way;

‘...One of the reasons we fail to
understand business crime is because we put crime into a category that is
separate from normal business. Much crime does not fit into a separate
category. It is primarily a business activity...’

When dealing with such people, it is
necessary to confront them with the correct and proper tools and resources, and
that is why I say that the present regime of financial regulation is useless,
because in this country we have traditionally failed to adopt the proper
mechanisms and employ the right people to go up against these criminals. And
this is why we consistently fail!

For some reason which I have never
understood, there is an accepted wisdom within the British administrative
psyche that teaches that the only people who should be allowed to have any
responsibility when it comes to dealing with those from the upper
socio-economic class, are people who come from the same class and cultural
background!

Quite how this piece of inspired lunacy was
allowed to become embedded in the British sub-culture is hard to understand,
but there it is, as immutable as the
laws of the Medes and the Persians!

As Edwin Sutherland, the original author of
the phrase 'White Collar Crime' once put it so succinctly;

"...The behaviour of persons of respectability, from the
upper socio-economic class, frequently exhibits all the essential attributes of
crime, but that it is only rarely dealt with as such. This situation arose, he
said, from a tendency for systems of criminal justice in Western societies to
favour certain economically and politically powerful groups and to disfavour
others, notably the poor and unskilled who comprise the bulk of the visible
criminal population..."

So, when the agencies of social control
like the Civil Service, the financial regulators or the agencies which provide
for financial self-regulation come to hire their staff, they perennially hire people
like themselves, 'one of us', a 'safe pair of hands', someone who isn't going
to rock the boat.

The financial sector culture demands that
they be treated wholly differently from ordinary criminals. indeed, in my
experience, the financial sector and its compliance officers completely reject
the concept that theirs is in any way a 'policing function'. They will deny on
a stack of bibles any suggestion that their role is intended to provide any
sort of policing control mechanism, and they refuse to adopt policing tactics.
To make things worse, very few of them have any experience or knowledge of the
definitions or workings of the criminal law.

This of course is a huge mistake, because
the banksters they are regulating are behaving like criminals in every sense.
If the people who are required to supervise their compliance with the law. don't
know the wider law, then they are never going to be competent or capable at dealing
with these professional criminals.

But they will never, ever, stop to consider
hiring former senior detectives to be posted to these roles. It is something
that just will not happen, because the police and the way in which they want to
deal with the criminal class, doesn't fit nicely with the accepted way of
dealing with these banksters and their satraps.

Detectives don't differentiate between
classes of criminal, people who deliberately go out of their way to break the
criminal law are viewed as criminals, regardless of the cut of their suit!

I experienced this first hand when I was head
of investigations and enforcement at one of the UK's early self regulating
organisations. I was hired by the chief executive who had known me when I was a
detective, and he was very happy to employ my skills. But they were deeply
resented by the other members of the Compliance Department, who were always
accusing me of treating our members with scant regard for their status.

I couldn't have given a flying fuck for
their status, I saw my function as protecting the interests of the investing
public and if these criminals were intent on getting in my way, then my intention
was to disabuse them of that idea pretty quickly. I used my professional
detective skills to get the evidence we needed to discipline these criminals,
and this became deeply resented, not only by those I put out of membership and
thus out of business, but by my colleagues who felt that I was not giving them
as much leeway as they felt that their membership allowed them.

When I pointed out that these people were
stealing their client's money or cheating them out of what they were lawfully owed,
offences which I always reported to the police at every occurrence, and for
which I would give evidence, once they were charged, because I would have
already acquired the necessary evidence, it became clear that my policies were
considered to be unfair, and because I was adopting 'policing tactics', the
other members of the Compliance Executive looked for ways of getting rid of me.

How we change this state of affairs, I do
not know. I do know that employing lawyers whose only experience is in civil
litigation is not the right way to go about acquiring the necessary skills needed
to be able to deal with professional banksters.

Civil litigation is an entirely different
set of skills from criminal prosecution, so hiring civil litigators is a waste
of time, because they simply do not have the mental state of aggression needed
to take on the biggest criminals. What we need are efficient and previously
successful prosecutors who have a deeply
engrained knowledge of the criminal law, supported by former detective
investigators who have the experience and skills for going after criminals, the
more elevated, the better, and who enjoy taking them down and locking them up.
But a broadly based knowledge of the criminal law and its implications is the primary
requirement.

Look at the rubbish promulgated by Martin
Wheatley and the FSA about the supposed absence of relevant criminal
legislation to deal with the LIBOR scandals! As I have previously written,
there are enough laws to go after the criminals for LIBOR offences, for PPI
fraud, and for a whole raft of criminality, so let's get on with it.

If the Government were to adopt these
proposals, bring in a retiring criminal Judge as CEO of the FCA, hire a leading
criminal barrister as the Head of Enforcement, and bring in some decent former fraud
detectives, none of whom would be frightened of going up against Chief
Executives of banks, then we would begin to see a real change.

No sooner would rumours of bank scandals
begin to surface, then these investigators would be in the banks, using their
powers to seize evidence, arresting potential suspects, and undertaking
searching and aggressive investigations. There wouldn't be any 'deferred prosecutions'
or convenient little sweetheart deals, just paying a few fines while all the
gangsters retained their profits and their dividends.

There would be aggressive charges laid to
which the alleged perpetrators would be invited to nominate pleas at an early
stage to mitigate the length of prison sentence they were going to serve if
they were convicted. There would be huge personal fines, pension funds would be
frozen and used to capitalise compensation or asset recovery actions.

In this way, the Government could begin to
demonstrate a real commitment for going after city criminals and doing something
proactive to start to put the City back on a fair and even footing.

None of this requires any change in the
law; none of it requires any alteration of the existing regime. It just needs
an exercise of the will to see the job done!

About Me

Having spent my career dealing with financial crime, both as a Met detective and as a legal consultant, I now spend my time working with financial institutions advising them on the best way to provide compliance with the plethora of conflicting regulations and laws designed to prevent and forestall money laundering - whatever that might be! This blog aims to provide a venue for discussion on these and aligned issues, because most of these subjects are so surrounded by disinformation and downright intellectual dishonesty, an alternative mouthpiece is predicated. Please share your views with what is published here from time to time!